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MND NewsWire features plain and simple interpretations of industry related data and events written in a manner that maintains the interest of random readers while still catering to the perspective of a housing market professional.

According to CoreLogic, it doesn't matter whether you rent or recently bought a
home, your housing costs probably went up over the last year. Two
separate posts in the CoreLogic Insights
blog look at the rising costs, and find that homeowners are being hit harder than before. Still, when viewed
historically, the cost of owning remains more affordable.

There has been a steady
increase in rents since 2010. Many households vacated homeownership,
voluntarily or otherwise, and others that in better times would have bought
rented instead. Those increases hit an
annual peak, as measured by the CoreLogic Single-Family
Rental Index (SFRI), of 4.4 percent in February 2016.

Analyst Shu Chen
writes that, since then, the increases have declerated slowly. In August's most recent data, the index, which uses a repeat-rent analysis to measure the same
single-family and condo rentals, was up 3.0 percent year-over-year.

Overall rent growth
was pulled down by the high-end rental market, defined as
properties with rents 125 percent or more of a region's median. Those rents
increased 2.3 percent year over year in August, compared to a gain of 2.5
percent a year earlier. Meanwhile, rents in the low-end market, properties with
rents less than 75 percent of the regional median rent, increased 4.4 percent
year over year in August 2017, one percentage point lower than the August 2016
rate.

Rents are, of course, geographically
variable. Most of the 20 largest
core-based statistical areas had rent increases, but those with limited new
construction and strong local economies tend to have low rental vacancy rates
and stronger rent growth. The largest rate of growth was in San Diego, while Phoenix
experienced 4.3 percent year-over-year rent growth, driven by employment growth
more than double the national growth at 2.8 percent year over year. In contrast, Houston, which has been hit with
energy-related job losses since early 2015, saw rents decline by 0.9 percent
year-over-year (pre-hurricane) and Miami was also down. Seattle's skyrocketing
rents, and rents in other cities that experienced strong but less exuberant
gains, saw growth moderating significantly.

But at first glance, renters are getting off easy when compared to
those shopping for new homes and loans. Andrew LePage says that while home prices have risen about 6 percent over the past year, recent
homebuyers have taken on mortgage payments that have risen closer to 10
percent.

He looked at the "typical mortgage
payment", a monthly payment based on each month's U.S. median home sale price
using Freddie Mac's average rate on a 30-year fixed-rate mortgage with a 20
percent down payment. The measure does not include taxes or insurance. The
result, LePage says, is a good proxy for affordability because it shows the
monthly amount for which a borrower would have to qualify to purchase a median-priced
U.S. home. When adjusted for inflation, the typical mortgage payment also puts
current payments in the proper historical context.

It can be misleading, the author
says, to simply focus on the rise in home prices when assessing affordability.
For example, the median home price in August was up 6.3 percent year-over-year
in nominal terms, but, because mortgage rates had increased nearly 50 basis
points over that period, the typical payment was 10.1 percent higher.

To illustrate the importance of
including more than just home prices in affordability discussions, Figure 1
shows that even as the inflation-adjusted typical mortgage payment has trended
higher in recent years, as of August it was still 34.7 percent below the
all-time high payment of $1,250 in June 2006. That's because the average
mortgage rate back in June 2006 was about 6.7 percent, compared with 3.9
percent this August, and the inflation-adjusted median sale price in June 2006
was $242,723 (or $199,900 in 2006 dollars), compared with a median of $216,811
in August 2017.

There are forecasts (IHS Markit) for
inflation and income to rise gradually over the next year, while the consensus of
forecasts from various sources such as the GSEs, Realtors, and others, suggest
mortgages rates will be 70 basis points higher by August of next year. CoreLogic's forward-looking Home Price Index
suggests a 3.0 percent in real terms over the same period. "Based on these
projections," LePage says, "the inflation-adjusted typical mortgage payment
would rise from $816 this August to $908 by August 2018, an 11.3 percent
year-over-year gain. Real disposable income is projected to rise about 3.6
percent over the same period, meaning next year's homebuyers would see a larger
chunk of their incomes devoted to mortgage payments."

"While I can appreciate CoreLogic is trying to shed light on actual increases in payments vs prices, I'd like to see a bit more light before jumping into the rabbit hole of who has it easier between owners and renters," says Mortgage News Daily's Matt Graham. "Notably absent from this analysis is any mention of the benefits that owners realize from appreciation and tax deductibility (of both mortgage interest and property taxes). True, the latter is up for debate in new tax reform efforts, but current drafts would leave meaningful benefits for homeowners in place. Even without the tax benefit, home price appreciation (not to mention payment predictability) makes the issue far from black and white."

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